The scheme, which also includes £50m worth of help for disadvantaged under fives, will be open to children up to age 12 and start next year, instead of being rolled-out slowly over seven years as initially proposed. The announcement will benefit 1.9m families, according to Treasury figures.
The policy will only apply to families where both parents work, and individuals earning over £150,000 per year will be excluded. Unlike the existing employer voucher scheme, the new policy will be calculated per child, meaning single parent families will also benefit.
Announcing the policy today ahead of the chancellor’s Budget tomorrow, David Cameron and Nick Clegg will say the scheme is fair and will help to boost the economy. The cost to the exchequer will be £750m per year.
“Tax free childcare is an important part of our long-term economic plan. It will help millions of hard-pressed families with their childcare costs and provide financial security for the future,” the Prime Minister will say.
Deputy prime minister Nick Clegg adds that a £50m commitment to early years support for disadvantaged children will help “everyone get a good start in life”.
The government pledged £1,200 worth of support per child in last year’s Budget, to be staggered over a number of years up to a limit of £6,000.
Today’s announcement will see parents get £800 per year extra towards childcare costs, to be paid out more quickly than first thought.
Money will be paid into a savings account by parents, administered by National Savings and Investments, and the Treasury will pay an additional 20 per cent up to £10,000.
Other changes mean single parents, the self-employed and entrepreneurs will be able to take advantage.
Anyone working part-time and earning at least £50 per week will also be included, but those families where one parent earns over £150,000 will not be able to apply for government help.